S&P, Dow and Nasdaq Fall Sharply After China Tariff Threats and Trump Response
Stocks fell sharply on Wall Street on Friday, after a new flurry of tariff threats between Beijing and President Trump pushed the market toward its fourth straight weekly loss.
The S&P 500 was down around 2 percent in the early afternoon, and the Dow Jones industrial average and technology-heavy Nasdaq index had experienced similar drops.
Before the start of trading, China said it would answer the next round of American tariffs on Chinese goods by increasing tariffs on American imports. Around 11 a.m., Mr. Trump answered with a series of messages on Twitter.
“We don’t need China and, frankly, would be far better off without them,” he wrote, adding that he would respond to China’s tariff threat later in the day.
In another Twitter message, Mr. Trump said that American companies were “hereby ordered to immediately start looking for an alternative to China.”
Stocks, which had been climbing before trading started, promptly fell, as investors turned their attention away from a speech by Jerome H. Powell, the Federal Reserve chair, and back toward the continuing trade war between the world’s two largest economies.
The markets have been caught up in such crosscurrents for much of the year, with stocks tumbling on concerns about the continuing trade fight, only to be lifted by hopes that interest-rate cuts by the Fed could contain the damage caused by the conflict. More tariffs threats between Beijing or Washington then start the cycle again.
Mr. Powell noted on Friday that rising uncertainty over the Trump administration’s trade policy was a challenge for the central bank. But he reiterated that the Fed would act as needed to keep a decade-plus expansion going. Financial market prices suggest that investors are virtually certain the Fed will cut interest rates for a second time this year when it meets next month.
Mr. Powell’s speech did little to change those expectations, and stocks were largely unchanged after he was done. But Mr. Trump’s statements on Twitter drove the market sharply lower again.
Energy stocks experienced some the steepest losses in the S&P 500, as crude oil prices dropped more than 3 percent. Tech stocks tumbled and shares of semiconductor companies were down more than 3 percent. Apple dropped more than 4 percent. Microsoft and Amazon both fell more than 3 percent. Technology and semiconductor companies have proven especially sensitive to signs that the trade fight between China and the United States was worsening.
In its announcement on Friday, the Chinese government said it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.
It was the latest volley in a tit-for-tat battle that has shown growing signs of hurting the global economy. There is mounting evidence that the global industrial sector in particular is weakening. Germany, Europe’s trade-sensitive economic engine, contracted in the second quarter. And growth in industrial production in China has fallen to its lowest level since 2002.
Concerns about economic growth have touched off a global rush of money into the safety of bond markets. That has pushed bond prices up, while driving yields sharply lower. Such drops suggest that investors are lowering their expectations for economic growth and inflation.
The trend continued on Friday, with the yield on the 10-year Treasury note plunging to 1.51 percent shortly before 2 p.m. The plunge in long-term Treasury bond yields has pushed them below yields on shorter-term debt, an unusual situation known as an inversion of the yield curve.
Yield curve inversions are considered one of the most reliable leading indicators that an economic downturn is coming. Every recession in United States in the past 60 years has been preceded by an inversion, with the economy typically falling into recession 18 to 24 months later.
As the declines in stocks continued into late Friday trading, Mr. Trump offered a possible explanation for the fall.